Clipboard: 21 states, lawmakers look to challenge Mass. Medicare windfall

Twenty-one states are challenging a change to Medicare payments that landed Massachusetts hospitals an extra $624 million over two years at the expense of other states, Tracy Jan of the Globe staff reported in Sunday’s Globe.

Dubbed by those state the “Bay State boondoggle,” the windfall is the result of a rule that requires hospitals to be reimbursed for wage levels at least equivalent to those in rural hospitals. Nantucket Cottage Hospital is the only rural hospital in the state, and because of its island address it has high costs, raising the floor for hospitals across the state.

Jan reports that opponents are pushing for a change to the formula or even a plan to recoup some of what Massachusetts has been paid:

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Massachusetts, Connecticut, New Hampshire, and Rhode Island are among only nine states that win under the current system, negotiated in part by Senator John Kerry as part of the national health reform law. Massachusetts is by far the largest beneficiary, followed by California, which receives half as much money.

But those days could be numbered. The issue is expected to resurface in Congress in February, with entitlement reform as a backdrop during the debt ceiling negotiations. Proposed legislation has already been discussed by Republicans.

The American Hospital Association has also embarked on a study of the contentious system, which the organization has deemed “greatly flawed.” And the Centers for Medicare and Medicaid Services has recommended reforms for the wage reimbursement system that could eliminate the provision that benefits Massachusetts.

“Here you have a small hospital on an island in the Atlantic Ocean basically setting the payments for all the hospitals in Massachusetts, and as a result, reducing the payments for hospitals all across the country,” said Herb Kuhn, president of the Missouri Hospital Association. “It’s unfair and unjustified.”

This storm has been brewing for some time. Liz Kowalczyk of the Globe staff reported in August 2011 that Partners HealthCare had put the wheels in motion several years ago when Nantucket Cottage Hospital became a subsidiary and was recategorized as a rural hospital, with that change taking effect in October 2011.

It’s a complicated story, but Jason Graziadei, a reporter for the Inquirer and Mirror on Nantucket aptly summarized it on Twitter this way: “The rest of the country hates Nantucket and John Kerry for gaming Medicare.”

Dr. Greg Hinson, a family physician on Nantucket responded to the story on his blog saying, “don’t come pointing fingers at Nantucket!” He writes:

Partners did not come to Nantucket Cottage Hospital in 2008 wanting to acquire the hospital simply because they needed a small hospital on a tony island to fill out their portfolio. They didn’t ask NCH to give up their Critical Access designation, with the promise to make whole any losses they might incur as a result, just to be nice. This was their promise even back then, recapturing the hundreds of millions of dollars that had been diverted from state hospitals when that designation kicked in.

There was no attempt to game the system. Massachusetts Hospitals Association, along with the big hospital systems in the state, all noticed the checks from the government were getting smaller, researched it and realized why (our change to Critical Access designation) and found a quick and easy fix. Acquire NCH and drop the designation. Nothing wrong there.

To the 21 states crying foul now, I say, what took you so long? Don’t blame Massachusetts or Nantucket Cottage Hospital. Blame the Centers for Medicare and Medicaid Services that would even start with such an archaic formula to determine how much they should pay a hospital for taking care of sick, elderly people.